KUALA LUMPUR: Palm oil extended an advance to the highest level in two months on Tuesday amid signs of sustained weakness in Malaysia’s production.
Futures in Kuala Lumpur rose as much as 2.2% to RM4,480 a ton, the highest since May 12, when prices reached a record high of RM4,506.
The tropical oil is also tracking gains in rival soybean oil, which is up for a third day in Chicago as US crop conditions missed estimates.
Palm oil is supported by estimates showing dwindling output in Malaysia, said Gnanasekar Thiagarajan, head of trading and hedging strategies at Kaleesuwari Intercontinental.
Crude palm oil production in the second-biggest grower shrank almost 11% in the first 20 days of July from a month earlier, according to the Malaysian Palm Oil Association.
Top grower Sabah recorded a 14.6% decline in output, followed by Sarawak with a 14.4% fall and Peninsular Malaysia with an 8.8% drop.
Traders are ignoring all negative factors currently, Thiagarajan said, predicting that palm oil could extend a surge beyond RM4,700 a ton if prices manage to close above RM4,500 on Tuesday.
Sluggish demand could cap gains.
Exports from Malaysia fell 4% in the first 25 days of July from the previous month, according to AmSpec Agri.
While data from Intertek Testing Services show a smaller drop in overall sales, shipments to top buyer India slumped almost 34%.
Traders have brushed aside weaker exports to focus on tight supplies and poor production, Avtar Sandu, senior manager of commodities at Phillip Futures, said in a note.
“The seasonally higher production season ahead may not be as fruitful as previously assumed.” - Bloomberg